Graybeards Get It Wrong on Financials

One of the loudest and most pervasive themes by a lot of the graybeards is that there is still much more pain ahead in the financials.

Let me explain why that is wrong. First, the group is down from a year ago. It's been hammered mercilessly.

More important, every time the stock market rallies is another chance for these companies to refinance.

Remember, as they go up, the companies are in shape to tap the equity market again because those who bought lower are being rewarded, psyching others to take a chance. In fact, other than the monoline insurance faux bailouts, people who pony up are doing pretty well.

If you are a big leveraged-buyout company, you are sitting on a lot of cash; that cash can be put to work in a bank very easily and a decent return generated.

So a rising tide is lifting stocks like Citigroup (C - commentary - Cramer's Take) and Washington Mutual (WM - commentary - Cramer's Take) and Wachovia (WB - commentary - Cramer's Take). That allows outfits like Corsair to come in and take big stakes, as this one did in National City (NCC - commentary - Cramer's Take), lower than where the stocks are trading.

The effect is simple: The companies continue to get reliquified, making it much harder to knock them out. We still haven't seen the takeouts yet: How long will Wells Fargo (WFC - commentary - Cramer's Take) stay on the sidelines once Bank of America (BAC - commentary - Cramer's Take) closes on Countrywide (CFC - commentary - Cramer's Take) and becomes the biggest factor by far in mortgages? We haven't see PNC (PNC - commentary - Cramer's Take) strike, either. I figure both could be acquirers, further diminishing the bear case.

Watch this theme of graybeard bearishness in the face of incredible strength in the stock market.

It makes the case against the bears substantial, and you need to be more skeptical of it every time the market goes higher.

The bears don't want to let go. It's been such a good trade. It is, however, losing its cogency, as each one of the bad boy financials gets refinanced and the challenges grow more manageable.

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.